Earned leaves encashed are now not liable for Provident Fund deductions

March 12, 2008 onwards no Provident Fund deductions can be made from the amount received by an employee by encashing the earned leave. This is because earned leaves that are encashed do not constitute a part of ‘basic wages’ under Section 2(b) of the Employees’ Provident fund and Miscellaneous Provisions Act, 1952.

The Employees’ Provident Fund Organization has also directed through a circular directed to discontinue PF deductions on such earned leave encashments with immediate effect. Further, it has clarified that if any payment has been already made in respect of the same, it can be adjusted for future liabilities and no refund can be claimed from the same.